Nevertheless, the law still provides for circumstances in which there is doubt as to the meaning of contractual terms. It is known as the "contra proferentem" rule. It is difficult to come up with a saying which sounds anything like as impressive in modern English, but very roughly it equates to: "You made your bed – now you lie in it." Or, more precisely: "If the meaning of the wording within a contract is unclear, it is to be interpreted against the interests of the buffoon who drafted it." At least that should speed up the learning process.
The contra proferentem principle recently surfaced in the case Aqua Design & Play International Ltd and Fenflock Hansen Ltd vs Kier Ltd. Briefly, what happened was that Heathland UK appointed Kier to fit out a health and fitness centre, Kier appointed subcontractors and then Heathland became insolvent and did not pay Kier sums for work carried out by the subcontractors.
Kier's home-made subcontracts incorporated the Construction Confederation's Subcontract Conditions for use with the Domestic Subcontract DOM/1. Those conditions contain a "pay-when-paid" clause (which dedicated readers of these pages will know is still valid in the context of insolvency). The confederation had published corrections to those conditions, one of which deleted the pay-when-paid clause. However, Kier had made its own amendments to the DOM/1 conditions which reproduced most of the confederation's corrections, but not the one that deleted pay-when-paid. Kier therefore announced that as it hadn't been paid for the subcontract works, it wouldn't be doing any paying out either.
It looked as though Kier held a pretty good hand, however, the subcontractors had their own ace to play. They pointed out that, as Kier's subcontract stated that it incorporated DOM/1, it must be implied that it also incorporated all the published corrections to DOM/1, so the pay-when-paid clause should be deemed to have been deleted. There was at least a degree of ambiguity, so the subcontractors shouted "contra proferentem": Kier drafted its subcontracts, Kier messed them up, so Kier should jolly well suffer the unfavourable interpretation. Now it looked as though the subcontractors held the better hand. Indeed, the court at first instance interpreted the subcontracts without the pay-when-paid clause.
Kier drafted its subcontracts, Kier messed them up, so Kier should jolly well suffer the unfavourable interpretation
Kier had to pay its subcontractors.
Kier had lost the hand but it wasn't ready to concede the game. It took its case to the Court of Appeal and the judges there took a rather different view. Their lordships explained that it was all very well to apply the contra proferentem rule where the meaning of words in a contract really cannot be determined, but that does not mean you should drag them out at the first hint of ambiguity. You must look further at the context within which the words occur in the contract and see if that provides any clues. Here they felt there were clues in abundance. Kier had specifically incorporated almost all of the confederation's corrections verbatim except for the one deleting the pay-when-paid clause, and one other. Further, if Kier had intended to incorporate all of the confederation's corrections (but had inadvertently omitted a couple) it would probably have referred to "the corrections" as a whole rather than listing them. The court concluded that the contract in its entirety left no ambiguity as to Kier's intention: which was that the pay-when-paid clause should remain.
So the contra proferentem rule, which is treated by the courts as a last resort, was not applied in this case. Nevertheless, it is a sobering reminder of the rule, particularly if you are inclined to tinker with the wording of your contracts without being entirely sure what you are doing.
Postscript
Melinda Parisotti is an in-house barrister at Wren Managers, which manages a professional indemnity mutual for architects.
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